The Federal Inland Revenue Service (FIRS) announced its commitment to improving Nigeria’s tax-to-Gross Domestic Product (GDP) ratio by implementing a new e-Invoice system aimed at enhancing tax compliance, transparency, and minimizing revenue losses. The system, known as the Merchant Buyer Solution (MBS), is designed to replace traditional paper-based invoicing with a digital framework that ensures real-time validation and storage of transactions.
The e-Invoice system encompasses business-to-business (B2B), business-to-consumer (B2C), and business-to-government (B2G) transactions, offering a unified platform that aggregates transaction data. This data will provide valuable insights into supply chains, purchasing patterns, and financial transactions, which will aid in crafting data-driven fiscal policies.
Speaking at a stakeholders’ engagement for consultants to large taxpayers in Lagos, Mr. Tayo Koleosho, Chief of Staff to the Executive Chairman of FIRS, highlighted the significance of the platform. Set for full deployment by mid-year, Koleosho emphasized that the system would improve tax reporting, reduce evasion, and align Nigeria’s tax administration with global standards.
“Electronic invoicing enhances transparency for both businesses and tax authorities,” Koleosho stated. “Globally, it has proven effective in boosting compliance through inter-data exchange between businesses and tax authorities.”
While large taxpayers already demonstrate compliance rates exceeding 90%, the national average remains below 50%, primarily due to enforcement challenges among smaller businesses. The new e-Invoice system aims to bridge this compliance gap by automating tax reporting and ensuring seamless data exchange between businesses and tax authorities.
Koleosho further clarified the timeline for implementation, stating that the system would go live by July. He also emphasized that the system would benefit both businesses and the tax administration by making the process easier, more transparent, and more efficient for all parties involved.
To assist businesses in the transition, Koleosho assured stakeholders that FIRS would provide support for integrating accounting and enterprise resource planning (ERP) systems with the platform. Several large taxpayers have already volunteered to participate in the pilot phase, demonstrating their commitment to the initiative.
Mr. Mohammed Bawa, the Project Manager for the e-Invoice initiative, emphasized the critical role tax consultants will play in the system’s successful implementation. He called for broad-based adoption, particularly in a country like Nigeria, with over 200 million people. “Collaboration among all stakeholders is essential for the success of this reform,” Bawa said.
Bawa also highlighted the global context of Nigeria’s e-invoicing initiative, noting that over 21 African countries, including Ghana, Kenya, and Rwanda, have already adopted similar systems. He pointed out that Nigeria currently ranks 171 out of 190 countries in ease of paying taxes and that e-invoicing would help reduce human interaction in tax processes, making the system more efficient.
This initiative aligns with the Nigerian government’s broader objective of increasing the tax-to-GDP ratio from the current 10.3% to 18% within the next three years. By increasing transparency and efficiency, the system is expected to improve tax compliance, boost government revenue, and support the country’s economic growth.
The Coordinating Director of the Compliance/Enforcement Group at FIRS, Matthew Osanekwu, also provided insights into the regulatory framework supporting the initiative. He explained that Section 13A of the VAT Act mandates taxable persons to issue invoices, with penalties for non-compliance.
“Failure to issue a tax invoice is an offense that can result in a penalty of 50% of the transaction cost, while unauthorized invoice issuance can lead to imprisonment,” Osanekwu stated, stressing the importance of adhering to the new system.
He also reassured businesses of data security, noting that FIRS officials are bound by confidentiality laws, with severe penalties for unauthorized disclosure of taxpayer information.
Osanekwu urged tax consultants to actively support the transition, recognizing them as essential partners in improving compliance and increasing Nigeria’s tax-to-GDP ratio.